Are Independent Directors and Supervisory Directors Effective in Constraining Earnings Management?

The aim of this paper is to analyze the impact of corporate governance on earnings management in China. It focuses on two aspects from the perspective of board monitoring: the role of independent directors on the board and the supervisory directors in constraining earnings manipulation. This paper e...

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Bibliographic Details
Published in:Journal of finance, accounting, and management accounting, and management, 2014-01, Vol.5 (1), p.125
Main Authors: Habbash, Murya, Xiao, Lijuan, Salama, Aly, Dixon, Robert
Format: Article
Language:English
Subjects:
Accounting
Capital markets
Corporate governance
Earnings
Earnings management
Enforcement
Financial disclosure
Financial reporting
Institutional investments
New stock market listings
Public companies
Related party transactions
Scandals
Securities markets
Stock exchanges
Stockholders
Studies
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Summary:The aim of this paper is to analyze the impact of corporate governance on earnings management in China. It focuses on two aspects from the perspective of board monitoring: the role of independent directors on the board and the supervisory directors in constraining earnings manipulation. This paper examines whether the independence, financial/accounting expertise and official background and a higher proportion of independent directors and supervisors are related to the absolute value of discretionary accruals or discretionary revenue. By conducting the research on a large sample of Chinese listed companies from 2005 to 2010, the empirical results suggest that Chinese two-tier board structure comprising aboard of directors with at least one third independent directors and supervisory board fails to mitigate earnings management.
ISSN:2153-2818
2153-2826